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Real Estate Bisnow
The largest commercial real estate publication in the United States.
   
January 19, 2012 
 
 
 
NORTHERN NJ
MARKS THE SPOT

 
Northern New Jersey is in a state in high demand—and don’t expect that to change any time soon (after all it is the birthplace of the Jonas Brothers), panelists told a crowd of 325 at Bisnow’s Northern NJ State of the Market breakfast and schmooze yesterday at the Newark Club.
 
Marcus & Millichap regional manager Michael Fasano
The result, according to Marcus & Millichap regional manager Michael Fasano: competitive bidding, compressed cap rates, and investors’ flight to safety are stronger than ever. (Also, the Giants are in the NFC Championship game: coincidence?) There’s a particular movement into multifamily, whether Class-A or Class-B, and investors looking into less management-intensive properties.
Onyx Equities' Jonathan Schultz
Jersey City, in particular, is like Manhattan and in constipation mode, says Onyx Equities co-founder Jonathan Schultz. Rental rates are ticking up and it’s demanding NYC-style cap rates. The rest of Northern NJ has buildings ready to be sold, but it’s a judicial state and foreclosures take forever, he notes. There’s capital to be had, but the financial markets can be difficult if your deal has hair on it (the same can be said about soup) or you’re a so-so operator. It’s also tricky to buy notes on a one-off basis since you have to write big equity checks. But there’s opportunity over the next 18 months: loans under $10M. Regulations are hitting regional banks, forcing them to move.
Matrix Development Group CEO Joseph Taylor
It’s a great time to be a seller, portends Matrix Development Group CEO Joseph Taylor. The buy side is lumpy with interest rates where there are, but we’re coming up on a time where owners will start to recycle and redeploy. Towns are also welcoming development like they never have before. “There are real green shoots out there,” he says.

Roseland Property Co partner Carl Goldberg

On the multifamily side, “there’s a fundamental shift of how people are perceiving their lifestyles,” says Roseland Property Co partner Carl Goldberg, noting that more residents are committing themselves to luxury digs near transit. People thought Roseland was crazy for building Jersey City’s The Monaco apartment building, he says, but now it’s 96% leased at $43/SF. Multifamily is even the darling of banks and investors; Joseph adds that this generational change is affecting cap rates, institutional strategies, and bringing new players into the urban core.
Crowd Shot
But Jonathan expressed concern about the bubble being created by supply and demand on the multifamily side, particularly with the “go where it’s safest” mentality of the institutional and pension funds. Carl adds we’re still in a high-barrier-to-entry market, and this supply-demand disconnect has been here for two decades. “At what point will we saturate and overbuild the market?” he asks. Absorption in areas from Jersey City to Weehawken and Morristown to West New York is moving 45 apartments per month. Even outer-ring ‘burbs are getting in the game, with municipalities sending out RFPs for underutilized land.
Heller Industrial Parks prez Jeff Milanaik
It’s the first time in three years that panelists were on the same page—optimism (we've heard tales of this strange thing before), says Heller Industrial Parks prez Jeff Milanaik. Investors are again looking at stable industrial. But even so, the supply-demand issue on the multifamily side is encouraging developers to diversify—and having a background in industrial is helpful, particularly if you’re dealing with situations like cleanups and adaptive reuse.
 
Russo Development prez Ed Russo
Class-A core industrial is better than ever, adds Russo Development prez Ed Russo, noting more investors than ever are looking for opportunistic buys—one asset he had for sale got 13 offers, four of those at a sub-6.2% cap rate. The rental side had a rough few years, but it’s picking up again. “[Rates are] 25% to 30% less than three or four years ago, and we’re seeing some of the same prices we saw 25 years ago,” he said. “But at least there are deals.” One bright spot to keep your eyes on: data centers.
 
Chris Caslin, a member of sponsor Cole Schotz
So where’s the future, asked moderator Chris Caslin, a member of sponsor Cole Schotz. Michael says what’s missing is the job growth—we need things to accelerate. Developers will also be looking at the way they run their businesses, Jeff says. “The successful real estate company won’t be one-dimensional, but multi-disciplined.” Check back next week for more from our event and sponsors.
 
On this day in 1993, Fleetwood Mac reunited to play "Don't Stop" at Bill Clinton's inaugural gala. Who’s playing next year? Send predictions and story ideas to amanda@bisnow.com.
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